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1 – 10 of over 7000
Article
Publication date: 10 July 2020

Azira Abdul Adzis, Hock Eam Lim, Siew Goh Yeok and Asish Saha

This study investigates factors contributing to residential mortgage loans default by utilizing a unique dataset of borrowers' default data from one of the pioneer lending…

Abstract

Purpose

This study investigates factors contributing to residential mortgage loans default by utilizing a unique dataset of borrowers' default data from one of the pioneer lending institutions in Malaysia that provides home financing to the public. Studies on mortgage loan default have been extensively examined, but limited studies utilize the individual borrower's data, as financial institutions generally hesitant to reveal their customers' data due to confidentiality issue.

Design/methodology/approach

This study uses logistic regression model to analyze 47,158 housing loan borrowers' data for the year 2016.

Findings

The findings suggest that male borrowers, Malay and other type of ethnicity, guarantor availability, loan original balance, loan tenure, loan interest rate and loan-to-value (LTV) ratio are the significant factors that influence mortgage loans default in Malaysia.

Research limitations/implications

Future studies may expand the sample by employing data from other types of financial institutions that would give greater insights as findings might vary due to differences in objectives, functions and regulations. In addition, the findings are subjected to the censoring bias where future studies could perform the survival analysis to control for censoring bias and re-validating the findings of the present study.

Practical implications

The findings provide valuable insights for lending institutions and the government to formulate housing loan policy in Malaysia.

Originality/value

To the best of the authors' knowledge, this is the first study in the context of emerging economies that uses financial institution's internal data to investigate factors of mortgage loan default.

Details

Review of Behavioral Finance, vol. 13 no. 5
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 1 November 2011

Arindam Bandyopadhyay and Asish Saha

The primary objective of the paper is to demonstrate the importance of borrower‐specific characteristics as well as local situation factors in determining the demand prospect as…

2214

Abstract

Purpose

The primary objective of the paper is to demonstrate the importance of borrower‐specific characteristics as well as local situation factors in determining the demand prospect as well as the risk of credit loss on residential housing loan repayment behavior in India.

Design/methodology/approach

Using 13,487 housing loan accounts (sanctioned from 1993‐2007) data from Banks and Housing Finance Cos (HFCs) in India, this paper attempts to find out the crucial factors that drive demand for housing and its correlation with borrower characteristics using a panel regression method. Next, using logistic regression, housing loan defaults and the major causative factors of the same are examined.

Findings

In analyzing the housing demand pattern, some special characteristics of the Indian residential housing market (demographic and social features) and the housing loan facility structure (loan process, loan margin, loan rate, collateral structure etc.), that have contributed to the safety and soundness of the Indian housing market have been deciphered. The empirical results suggest that borrower defaults on housing loan payments is mainly driven by change in the market value of the property vis‐à‐vis the loan amount and EMI to income ratio. A 10 percent decrease in the market value of the property vis‐à‐vis the loan amount raises the odds of default by 1.55 percent. Similarly, a 10 percent increase in EMI to income ratio raises the delinquency chance by 4.50 percent. However, one cannot ignore borrower characteristics like marital status, employment situation, regional locations, city locations, age profile and house preference which otherwise may inhibit the lender to properly assess credit risk in home loan business, as the results show that these parameters also act as default triggers.

Originality/value

This study contributes on the micro side of the housing market in India, since it uses unique and robust loan information data from banks and HFCs. The empirical results obtained in this paper are useful to regulators, policy makers, market players as well as the researchers to understand housing market demand and risk characteristics in an emerging market economy such as India.

Details

Journal of Economic Studies, vol. 38 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 8 May 2018

M. Kabir Hassan, Jennifer Brodmann, Blake Rayfield and Makeen Huda

The purpose of this paper is to investigate proprietary data from customers of a Southern Louisiana credit union. It analyzes the factors that contribute to an accelerated failure…

Abstract

Purpose

The purpose of this paper is to investigate proprietary data from customers of a Southern Louisiana credit union. It analyzes the factors that contribute to an accelerated failure time (AFT) using information from customers’ credit applications as well as information provided in their credit report.

Design/methodology/approach

This paper investigates the factors that affect credit risk using survival analysis by employing two primary models – the AFT model and the Cox proportional hazard (PH) model. While several studies employ the Cox PH model, few use the AFT model. However, this paper concludes that the AFT model has superior predictive qualities.

Findings

This paper finds that the factors specific to borrowers and local factors play an important role in the duration of a loan.

Practical implications

This paper offers an easily interpretable model for determining the duration of a potential borrower. The marketing department of credit unions can then use this information to predict when a customer will default, thus allowing the credit union to intervene in a timely manner to prevent defaults. Further, the credit union can use this information to seek out customers who are less likely to default.

Originality/value

This study is different from the previous research due to its focus on credit unions, which have distinct characteristics. Compared to similar lending institutions, the charter of the credit union does not allow management to sell off loans to other investors.

Details

International Journal of Bank Marketing, vol. 36 no. 3
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 5 September 2016

Basri Savitha and Naveen Kumar K.

Evaluating a portfolio of agricultural loans has become an important issue in recent years primarily due to a large number of loan defaults. The purpose of this paper is to…

Abstract

Purpose

Evaluating a portfolio of agricultural loans has become an important issue in recent years primarily due to a large number of loan defaults. The purpose of this paper is to investigate the factors influencing credit repayment behavior of farmers in Karnataka.

Design/methodology/approach

The study is based on secondary data of 590 farmers collected from a private bank in the state of Karnataka, India. Binary logistic regression and multinomial regression analysis was carried out to estimate the probability of non-payment of a loan.

Findings

The results of the regression confirm a significant relationship between non-repayment of agricultural credit and characteristics of borrowers such as the age, years of banking relationship, yield of the crop, distance to bank branch, size and tenure of the loan, farm size and leverage and efficiency ratio.

Practical implications

The factors predicted by the model do certainly help in improving the decision-making process in agricultural lending. A rigorous assessment of family responsibilities, farm size, credit-to-asset ratio, interest burden on the farmers and farm income is suggested to reduce the probability of doubtful assets.

Originality/value

The studies that predict default risk in agricultural loan are limited in India. This is one of the few studies that estimate the determinants of substandard and doubtful categories of credit in a private sector bank.

Details

Agricultural Finance Review, vol. 76 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 26 January 2023

Yuting Rong, Shan Liu, Shuo Yan, Wei Wayne Huang and Yanxia Chen

Lenders in online peer-to-peer (P2P) lending platforms are always non-experts and face severe information asymmetry. This paper aims to achieve the goals of gaining high returns…

Abstract

Purpose

Lenders in online peer-to-peer (P2P) lending platforms are always non-experts and face severe information asymmetry. This paper aims to achieve the goals of gaining high returns with risk limitations or lowering risks with expected returns for P2P lenders.

Design/methodology/approach

This paper used data from a leading online P2P lending platform in America. First, the authors constructed a logistic regression-based credit scoring model and a linear regression-based profit scoring model to predict the default probabilities and profitability of loans. Second, based on the predictions of loan risk and loan return, the authors constructed linear programming model to form the optimal loan portfolio for lenders.

Findings

The research results show that compared to a logistic regression-based credit scoring method, the proposed new framework could make more returns for lenders with risks unchanged. Furthermore, compared to a linear regression-based profit scoring method, the proposed new framework could lower risks for lenders without lowering returns. In addition, comparisons with advanced machine learning techniques further validate its superiority.

Originality/value

Unlike previous studies that focus solely on predicting the default probability or profitability of loans, this study considers loan allocation in online P2P lending as an optimization research problem using a new framework based upon modern portfolio theory (MPT). This study may contribute theoretically to the extension of MPT in the specific context of online P2P lending and benefit lenders and platforms to develop more efficient investment tools.

Details

Industrial Management & Data Systems, vol. 123 no. 3
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 4 November 2011

Shafinar Ismail, Antoaneta Serguieva and Satwinder Singh

The purpose of this paper is to measure the antecedents of students' attitude and the impact of students' attitude on the intention to repay study loans.

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Abstract

Purpose

The purpose of this paper is to measure the antecedents of students' attitude and the impact of students' attitude on the intention to repay study loans.

Design/methodology/approach

Primary data from 428 students in universities in Malaysia are collected and six constructs from theory are identified: perceptions that loan repayment will affect the quality of life after graduation; awareness of loan repayment issues created by media; perceptions towards loan agreement; parental influence; students' attitude towards loan repayment; and intention to repay loan. Structural equation modelling approach is adopted to analyze the data.

Findings

Constructs of parental influence and perceptions that loan repayment will affect the quality of life after graduation are found to have a direct relationship with students' attitude towards loan repayment; perceptions towards loan agreement is found to influence belief that loan repayment will affect the quality of life after graduation; and awareness of loan repayment issues created by media is found to affect parental influence. The relationship between students' attitude and intention is found to be statistically positive and significant.

Research limitations/implications

The study has been conducted in aggregate form. Future studies could account for ethnic, gender, and regional differences.

Practical implications

The primary users of the results of this study would be the countries that provide education loans, and keen to cut down on student loan defaults.

Originality/value

The study is first of its kind to approach the issue of student loan defaults in a multi‐method manner and develop a comprehensive theoretical model that can be put to empirical test by future researchers.

Details

Journal of International Education in Business, vol. 4 no. 2
Type: Research Article
ISSN: 2046-469X

Keywords

Article
Publication date: 10 November 2020

Hao Ying, Lujie Chen and Xiande Zhao

This study aims to clarify the risk management practices of banks as supply chain finance (SCF) service providers.

Abstract

Purpose

This study aims to clarify the risk management practices of banks as supply chain finance (SCF) service providers.

Design/methodology/approach

Using 4,014 evaluation and approval reports, this study constructed five risk management factors and examined their functions with secondary data. Two text-mining techniques (i.e. word sense induction, TF–IDF) were used to equip the classic routine of dictionary-based content analysis.

Findings

This research successfully identified four important risk management factors: relationship-based assessment, asset monitoring, cash flow monitoring and supply chain collaboration. The default-preventing effect of these factors are different and contingent on the type of financing contexts (i.e. preshipment, postshipment).

Practical implications

The empirical evidences provide practical implications for SCF service providers to manage risk. SCF service providers are suggested to pay more attention to cash flow monitoring when providing postshipment financing services and shift the focus to relationship building and supply chain collaboration when providing preshipment financing services.

Originality/value

The study shows that a large volume of textual materials can provide adequate clues for researches as long as they are mined with suitable analytic techniques and approaches. Based on the results, SCF service providers can identify problems of their operations and directions for improvement. In addition, the risk management vocabulary from the E&A reports can be utilized by SCF service providers to digitize their loan approving process and, further, to facilitate the decision-makings.

Details

Industrial Management & Data Systems, vol. 121 no. 2
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 10 April 2009

Malimba Musafiri Papias and P. Ganesan

Like other developing countries, Rwandan rural credit market is repressed, shallow, segmented, inefficient and dual structured where both formal and informal financial systems…

3688

Abstract

Purpose

Like other developing countries, Rwandan rural credit market is repressed, shallow, segmented, inefficient and dual structured where both formal and informal financial systems operate side by side. While the later has been playing a predominant role, cooperative societies have emerged as an apt method of increasing the delivery of formal rural credit and savings facilities on sustainable and non‐exploitative terms albeit of financial imprudence stemming from poor credit repayment records. Thus, the purpose of this paper is to examine the factors contributing to credit repayment behaviour among the members of savings and credit cooperative societies in rural Rwanda.

Design/methodology/approach

Both exploratory and descriptive designs are used for primary data collection on variables contributing to the repayment behaviour in savings and cooperative societies. Thereafter, a binary logistic regression empirical model is employed to estimate the contribution of each variable to credit repayment rate.

Findings

The results from the tested empirical model show that age, gender and size of the household, purpose for credit, interest rate charges and number of official visits to the credit societies, have a strong effect on loan repayment performance (statistically significant at p<0.05) whereas size of credit disbursed, credit processing and disbursing time, borrowers' market place and income transfer from relatives and friends are more or less statistically significant at p<0.20 level. The remaining factors have logical and explainable sings but are not statistically significant.

Research limitations/implications

The primary limitation of this study is the scope and size of its sample as well as absence of income factor as one of important variable influencing repayment behaviour. These limitations may have an effect on the lending policy of the cooperative banks.

Originality/value

An understanding of the socio‐economic factors affecting repayment behaviour of rural clients is essential for the outreach and sustainability of the mushrooming cooperative societies in the country. Hence, this paper contributes to the empirical literature on the provision of rural financial services in African countries south of Sahara and Rwanda in particular.

Details

International Journal of Social Economics, vol. 36 no. 5
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 16 October 2009

Nicholas Biekpe and Josephat M. Kiweu

The purpose of this paper is to highlight important factors that influence funding decisions from the perspective of commercial lenders, and suggest commercialization of…

1565

Abstract

Purpose

The purpose of this paper is to highlight important factors that influence funding decisions from the perspective of commercial lenders, and suggest commercialization of microfinance as a source of alternative development finance.

Design/methodology/approach

A survey of industry experts on funding decisions representative of proponents of commercial microfinance is conducted to help provide views on the most important considerations in their lending practice.

Findings

The study finds that specific critical success factors define minimum pre‐conditions for microfinance institutions considering commercial funding as an alternative source of finance. The study reveals that the three most important considerations for lending evaluation are transparency in financial reporting, sound financial management, and previous history of borrowing.

Research limitations/implications

The study carried out is based on a relatively small sample and puts significant reliance on respondents' opinions.

Originality/value

This is probably one of few attempts to explore the possibility of a linkage between microfinance and capital markets. The paper will be of interest to microfinance institutions, commercial banks, international donors and wholesale funds with an interest in investing in the microfinance industry.

Details

Managerial Finance, vol. 35 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 September 1997

Day‐Yang Liu and Shin‐Ping Lee

Aims to distinguish among different levels of default risk for residential mortgage loans and to examine the significant factors for the different levels of default risk…

2321

Abstract

Aims to distinguish among different levels of default risk for residential mortgage loans and to examine the significant factors for the different levels of default risk. Classifies the sample into default and non‐default groups and analyses the original mortgage loan data by factor and cluster analyses based on borrower characteristics, property characteristics and microeconomic variables in order to derive risk classifications from various likelihoods of default. Furthermore, applies logit, probit and discriminant analyses to examine the significant factors for all three clusters. The empirical results show that the three clusters may be ranked as follows, in order of risk, from the least to greatest likelihood of default: the owner‐occupied housing buyer, invester group and young buyer clusters. In addition, the factor “borrower’s education level” has negative impact for all three clusters.

Details

Journal of Property Finance, vol. 8 no. 3
Type: Research Article
ISSN: 0958-868X

Keywords

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